Burden of Prescription Drug Costs in the United States

It appears to be a good time to review some of the fundamental principles of managed care. A recent caption read “PPOs will halt the slide in Medicare managed care.” More than 15 years ago, managed care was defined by core principles that included negotiated, provider reimbursement rates through preferred provider organizations (PPOs) risk-contracting between health plans and providers, and increased accountability from determination of medical necessity and appropriateness through operation of utilization management programs. By the end of the 1980s, managed care was defined by at least one of 10 fundamental components that included prospective pricing, usual, customary and reasonable price determinations, service bundling, peer review, mandatory use review, benefit redesign, capitation payments, channeling, quality criteria, or health promotion. The Medicare PPO demonstration program that began January 1, 2003, modified, but did not change, the managed care features of the Medicare+Choice program. In fact, the Medicare+Choice PPO option in 2003 is not new at all. PPOs have been eligible to participate in Medicare+Choice since its inception, but only 2 PPOs had participated in Medicare+ Choice prior to the program change in 2003 that pays participating PPOs the greater of the county-specific premium amount or 99% of the national per-patient average annual payment amount in fee-for-service Medicare. The media attention to the Medicare+Choice PPO option may overstate the potential since, ironically, anti-trust enforcement from the federal government makes it difficult for physicians and other providers to form collective units to contract with Medicare PPO sponsors. Nevertheless, Medicare+Choice was not abandoning managed care in 2003 but, in fact, retained all of the former features of Medicare+Choice and all of the features that were first used to describe managed care 15 years ago. For Medicare members, the “new” feature in Medicare+Choice in 2003 allowed the use of providers outside the designated network, but at a higher out-of-pocket cost. In this way, Medicare+Choice resembles most employer-sponsored health plans that had years earlier adopted tiered, point-of-care, cost-share features to permit beneficiaries more choices in providers and services.


■■ Burden of Prescription Drug Costs in the United States
What is the true "burden" of prescription drug costs in the United States? Talk to a cab driver without insurance, and prescription drug costs are expensive and even unaffordable. Talk to the person who builds the cab, and prescription costs in the United States are not a problem. One person pays $3 or more per day to lower serum cholesterol, and the other pays less than 10 cents per day for the same drug.
The cab driver pays for the entire cost of the prescription drug at the point of service. The union worker who builds the taxi cab pays a fraction of the cost of the prescription drug at point of service, often less than 10 percent of a negotiated, contract price of the drug. This copayment arrangement for the insured, union worker reduces the personal burden of prescription drug costs and can "insulate" the worker from true prescription drug costs.
The burden of prescription drug costs can be more acute for the elderly, who on average use 3 times the number of prescriptions per month compared to persons younger than 65 years. 7 Yet, a remarkable 17% of Medicare beneficiaries had no ($0) spending on prescription drugs in CY 2001. 8 Spending of $1,000 or more was found among 28% of Medicare beneficiaries and accounted for 76% of total expenditures for prescription drugs for this population.
Survey data from 10,927 nonstitutionalized seniors in 8 geographically diverse states in 2001 showed that 35% of seniors had drug coverage under a Medigap policy, 25% of seniors were enrolled in state pharmacy assistance programs, and 19% of seniors in Medicare health maintenance organizations (HMOs) spent at least $100 per month ($1,200 per year) on prescriptions in 2001. 9 Medicare HMOs were important sources of drug coverage for seniors in California (30%) and Colorado (24%) but were less important in other states, ranging from a low of 7% in Illinois to 14% in Pennsylvania. Unfortunately, Medicare+Choice plans became unavailable to about one third of all Medicare+Choice members, about 2.5 million people, between 1998 and 2002, 10 and access to zero-dollar premium Medicare+Choice plans fell from 61% in 1999 to 53% in 2000 to 39% in 2001 and to 32% in 2002. 11 Access to any Medicare+Choice plan with drug coverage fell from 65% of the entire U.S. Medicare population in 1999 to 50% in 2002. This report from the Centers for Medicare and Medicaid Services (CMS) also found that the average monthly value of cost sharing for Medicare-covered services increased by 79% from $14.88 per enrollee per month in 2001 to $26.60 in 2002.
In a previous issue of the Journal, Cox and Henderson found that Medicare+Choice members with an annual drug benefit maximum (dollar limit) relied on prescription drug samples to mitigate the financial burden of prescription drug needs. 12 This finding highlighted the controversy surrounding this potentially self-defeating behavior since drug samples in physician offices are generally higher-cost drugs without generic equivalents. The use of drug samples might contribute to complacency among some physicians rather than encouraging them to select lower-cost therapeutic alternatives for these patients that would truly reduce the financial burden of prescription drugs for the elderly. In this issue of the Journal, McKercher, Taylor, Lee, Chao, and Kumar found that prescription drugs in elderly families accounted for approximately twice the proportion of total out-of-pocket medical care burden compared to nonelderly families, 45.6% versus 23.7%, respectively. The higher proportion of total medical care burden and total economic burden attributable to prescription drugs in the elderly was traced to larger prescription quantities, price, and utilization but not more expensive drugs. 13 This finding may be explained, in part, by the higher proportion of total prescription drug spending

E D I T O R I A L
www.amcp.org Vol. 9, No. 1 January/February 2003 JMCP Journal of Managed Care Pharmacy 91 attributable to generic drugs, 20.5% for the elderly families versus 18.7% for nonelderly families. Access to data on days of therapy, in addition to prescription (Rx) counts and dosage units, would have helped to further clarify this finding. 14 The economic burden of prescription drugs for nonelderly and elderly families will increase, at least in the short term. Prescription drug spending is projected to grow by at least 13% and as much as 20% in 2003. [15][16][17] An upward spiral of economic burden is created by rising prescription drug prices and prescription drug utilization coincident with stagnant personal income. The perceived burden of prescription drug expenditures also will increase with declining household wealth in the United States, which fell in the third quarter of 2002 to its lowest level since 1995. 18 The burden for elderly families is not distributed evenly, and prescription drug coverage is associated with higher utilization for elderly persons with ostensibly the same health status. For elderly persons with no chronic disease conditions, drug utilization is more than 2 times (112%) higher for persons with prescription drug coverage than for persons without prescription coverage. The difference in drug utilization for the elderly with and without prescription drug coverage declines steadily with declining health status. For the elderly with 5 or more chronic disease conditions, the difference in prescription drug utilization is just 15%, 3.7 prescriptions per person per month for the elderly with prescription drug coverage versus 3.2 prescriptions per person per month for the elderly without prescription drug coverage. 19 About 76% of Medicare beneficiaries had prescription drug coverage at some point in 1999. 20

■■ Preventing Medication Errors and Adverse Drug Events
The House Energy and Commerce Committee on September 25, 2002, approved a bill to create a confidential, voluntary database that health care providers could use to report medical errors. 21 The legislation would have to be reconciled with a similar bill approved the previous week by the House Ways and Means Committee and a Senate bill, the Patient Safety and Quality Improvement Act. 22 The House Energy and Commerce Committee bill would allow patient-safety organizations to monitor the database and use the information to develop recommendations on ways to prevent future mistakes. 23 The legislative proposal received fuel from a government research report that estimated medical errors cause thousands of deaths and injuries and cost $29 billion a year.
Yet, there is disagreement about the scope and severity of the threat to patient safety posed by the U.S. health care system. The first Institute of Medicine report on the matter, To Err Is Human, was released in late 1999 and set off a firestorm of debate about the estimated versus true magnitude of the threat to patient safety in the current U.S. health care system. 24 This IOM report was criticized for overestimating the incidence of preventable deaths due to medical errors and for adding to the miscommunication on the subject by fostering the interchangeable use of "medical error" and "adverse event." 25-27 A recent study of physicians and nonphysicians of their first-hand experiences with medical errors helped to provide additional perspective on the perceived severity of the threat to patient safety. Parallel surveys of 831 physicians and 1,207 nonphysicians (adults age 18 or older) conducted between April 11 and June 11, 2002, found that 35% of physicians and 42% of the public reported personal experience with medical errors in their own or a family member' s care. However, neither group viewed medical errors as one of the most important problems in health care in 2002. 28 These findings may call into question the sense of urgency to stamp out medical errors expressed by many observers, consultants, and national organizations. The findings of these surveys also appear to add support to those who disagree with the reports of widespread medical errors in the U.S. health care system 29 and to those critical of patchwork methods to improve health system quality. 30 Reliable measures are necessary to benchmark and assess the value and return on investment from allocation of finite resources to eliminate errors of commission in health care. Some argue that finite resources might be better spent to reduce errors of omission, such as the failure to control hypertension. 31 While the debate continues regarding the true magnitude of the threat to patient safety posed by the U.S. health care system, evidence is accumulating regarding the disparity between estimates of medical errors and the actual incidence of medical errors and harm. Fundamental to our understanding is the recognition that a medical error (ME) may or may not be associated with an adverse event (AE). 32 Similarly, a medication error may result in no harm and no adverse drug event (ADE). 33 The U.S. Pharmacopeia Center for the Advancement of Patient Safety reported in December 2002 that data reported by 368 health care facilities in 2001 showed 2.4% of hospital medication errors to have resulted in patient injury or death; the incidence of death from medication error was 14, or 1.3 per 10,000 medication errors. 34 A study published in September 2002 based upon direct observation, a method more reliable than other methods, found a 19% error rate in medications (drug MEs) and a 7% rate of potentially harmful drug errors (ADEs). 35 Certainly, the first priority is to prevent the ADEs and adverse medical events (AMEs) with the worst outcomes, death or disability. Categorization and differentiation of medical errors and medication errors from ADEs and AMEs and stratification of the events by level of severity of harm 36 will permit the focus necessary to allocate the resources to prevent them. It is now well accepted that the preferred method to improve identification and prevention of errors and adverse outcomes from errors involves self-investigation of system causes rather than external review and punishment of organizations and individuals. [37][38] The method of error reporting is also critical to the identification of true-positive incidences of medical errors, including medication errors. Self-reporting of medication errors may under-report the true incidence by as much as 95%, 39 and current methods of collecting information on ADEs may under-